News & Tips
Posted: 6th September 2017
If you are paid under the normal PAYE system or receive pensions, for example, HMRC issue tax codes to the payer to collect income tax at source. With the Real Time Information system now tried, tested and working, HMRC has also started populating indiviudal's digital tax accounts. These DTA's are feed directly from source, and it means HMRC has information about other income on a regular basis, and they will change PAYE codes to suit.
The danger is that your PAYE code will keep changing during the year and come the 5th April, might still not be correct. HMRC has promised not to change an individauls's PAYE code more than once a month which in itself is of concern if this might indicate the number of frequencies they envisage.
Keep an eye on all PAYE code notifications and phone HMRC immediately if yours is not correct.
Posted: 25th August 2017
The flexible pensions regime is a blessing indeed but, as they say, sometimes you have to be careful what you wish for. 25% of the pot might be tax free, but it's not always clear if that is the first 25% lump sum draw or 25% of a monthly draw. For someone paying tax at 40% it makes a big difference, so don't sign off the agreement until you understand.
We also come across cases where the 25% has already been crystalised ( i.e. drawn off ) but that is not the end of it because HMRC has to give the pension payer a code number for the tax to be deducted at source. This code number might change on a regular basis and if it turns out to be inaccurate, obviously has a significant effect on the anticipated payment of tax liabilites.
We had one client who drew off a £35,000 lump sum and as a 40% taxpayer, we advised that the pension company would deduct 40% at source but they didn't. HMRC had issued a code so that only 20% was deducted at source and the client had a catch up payment of £7,000. Fortunately, we were on top of the situation and the £7,000 had been set aside, but you can easily see where this might go wrong.
Posted: 14th August 2017
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With pretty much everyone inside the M25 on holiday, there isn't much news coming from HMRC at the moment. Brexit, on the other hand, seems always good for a story of some sort or another.This weekend's press was interesting with the Mail on Sunday reporting that the low pound and inflation had Remainers saying ' I told you so ' and the Times reporting a robust UK economy and unaccountable EU Commission proving the Brexiteers were right.
Hammond and Fox had combined forces over the weekend but the GRCA version has the UK going from one grey mush to another grey mush. It more depends on your glass being half full or half empty.
Posted: 7th August 2017
You gotta wonder sometimes. Roll up roll up - and for the latest daft idea from HMRC we have - sound of trumpets - SIMPLE ASSESSMENTS ! Yea - hooray. NOT. This is going back to yesteryear. So now they have come up with something old and something new, a marriage made in heaven which will drop onto your doorstep any time soon, the simple assessment.
You probably remember the good old days when we had to appeal against everything until they got it right, and so as they say, there is nothing new - we only have 60 days to appeal, or else, if it's wrong, it stays wrong forever. Be afraid but even more to the point, be on the alert. If one these arrives, let us know right away.
Posted: 27th July 2017
If you are using the VAT Flat Rate Scheme ( FRS ) you might want to double check because the rules changed on 1st April and so called " low cost traders " - mainly serviced based businesses - have to apply the new flat rate of 16.5%. A very large number of businesses use and used the FRS but there was significant abuse, so HMRC had to step in. The definition of ' low cost ' is fairly staright forward but HMRC has got wise to the plethora of claims that traders are not low cost because they are claiming that general expenses come within the definition of cost. HMRC is looking at goods here ( for resale ), not the supply of services, so the list of which costs are not recognised for low cost FRS traders is expanding quickly.
You need to check because the fines for non-compliance are quite high and you might want to pull out of the FRS now. This can be done in writing to HMRC stating the date you will cease to belong to this scheme. Obviously the FRS is still there for other trades and traders - which one applies to you ?
Posted: 24th July 2017
More news today about a possible recession but we live in a global economy, so let's be prepared for a hiccup rather than a meltdown. This is the key - be prepared. It's a bit like a hard or soft Brexit - some of which will be hard and some will be soft - and will affect people differently because this is more about personal debt ( again ) and the demise of the High Street rather than dodgy bank lending across the world. So let's be prepared for a slowdown, whatever that means to you and yours because all individuals and all business situations are as different as people's hopes and aspirations.
In the meantime, do some personal checks before the holidays, insurance, Wills, that kind of stuff which gets put on the back burner and look again at your business and life planning. Your own reaction to an event outside your control will determine your outcome every time - E + R = O - one our favourite equations.
Posted : 14th July 2017
The Finance Bill No. 2 was announced yesterday and, deep joy, the Making Tax Digital provisions are back ! It looks as though 6th April 2019 will be the start date for businesses and landlords below the VAT registration limit. We have to wait for more news about the rest which will be introduced by secondary legislation. It will be interesting to see if this Bill survives the Commons and Lords given the tight majority and desire of the opposition to do anything to take on the Conservatives. Interesting times !
Posted: 10th July 2017.
In the news today, Uber and Deliveroo and such like self employed contractors and their tax status - employed, with a contract, paying paye and ni, holiday pay and the like, with state benefits attached, or self-employed, with none of the above. The Taylor report is going to suggest such people are known as ' independent contractors '. This is a mess which has been waiting to surface again. The so called gig economy also covers a vast array of contractors, one man IR 35 companies, many of them new start ups working from home and many in the world of IT and journalism.
You don't have to think about this too much to work out the difference between say a university student here in Plymouth earning extra by cycling around the City of a weekend, and a London commuting IT digital marketing specialist operating though her own limited company. As things stand, the onus is on the employer to decide if that contractor is self emp[loyed or not - indeed, there is an HMRC tool on the Gov.UK website to aid the decision making priocess.
It looks like we could end up with ' independent contractors ' being given holiday pay etc, so where does that leave the massive army of self employed - high taxes to pay for it. We already know the Chancellor has tried to increase National Insurance for the self employed, and he won't need any excuse now. Having siad that, the s/e for years have bemoaned the lack of benefits, so let's hope we are witnessing a change. Mind you, if any of the previous attempts at clarification are anything to go by, yet another fine mess awaits !
Posted: 3rd July 2017
It's been a funny old first 6 months of the year. We started off thinking maybe we had the prospects of stability for a while and now look at it - the complete opposite. It's not at all helpful to business confidence. The Queen's Speech promised that even with low taxes, the economy would be stimulated to provide much need extra funds for the public purse. But there is not one ounce of evidence that the Government has this on its radar. The new Chancellor has Brexit firmly on his mind and HMRC is under-resourced as it is, without the overhaul of tax legislation needed to part company with Europe.
So, we have to keep calm and carry on. There have been suggestions that the Chambers of Commerce, Federation of Small Business, Institute of Directors and the like will be consulted over Brexit but let's really hope they don't squander the opportunity to take a swipe at the increase in stealth taxes we've had to endure over the last few years. We don't need to be battered any more, just left to get on with creating jobs and wealth.
For 2017-18 and until we know differently, the personal and business taxes will stay the same, as will national insurance, stamp duty and capital gains tax. We do know that taxes will increase from April 2018 and expect the self employed to be hit hard. The gig economy is throwing up too many anomolies between the employed and self employed taxes and if the media has noticed it, you can bet your bottom dollar that HMRC is not far behind. Let's make hay whilst the sun shines !
Posted 26th June 2017
City AM today reports a possible global crash due to risks in China. There might be a Brexit effect in the UK but it will be nothing compared with a global crash/recession. We live in a global economy nowadays. In fact, only Australia and Canada avoided the 2008 crisis. Is the UK stock market over valued by a weak £ ? This will go into immediate reverse when UK interest rates increase so the writing is on the wall here.
Meanwhile, there is no news of a post election Budget. Odd. So what is the Chancellor thinking now ? Our concern is the amount of resources which have to go into the Brexit negotiations, so other domestic and business policies might have to wait. The Queen's speech said that the economy would be stimulated to pay for improvements in public services and infra structure projects but that doesn't make any sense, certainly not without some sort of plan. In any event, there is virtually nil unemployment now, so you have to wonder if the Government has really thought about some of these statements !
Come on Phil - stop messing with your spreadsheets and give us some clear indicators of which way this is all going ( including MTD ).
Posted: 13th June 2017
As we said a couple of weeks ago. "What if". We know what happens next. Taxes go up but with all this uncertainty, businness will not invest and we cannot give any advice until the next Budget. We so need some stability. In that respect, the election might have that effect. For every action, there is a reaction, but time is marching on.
Small businesses need to carry on regardless. There is likely to be an increase in interest rates very soon. Everyone will blame Brexit obviously, but it's really George Osborne's policies of autoenrolment and minimum living wages plus business rates pushing up the costs everywhere.
Best plan is to get on with it, but we must have our own 'what if' options on the table.
So, on we go, into the chaos of yet another election or referendum or a vote anyway, the result of which seems to becoming more uncertain, the nearer we get to June 8th. What if Theresa May doesn't get a clear mandate? She could do a Cameron and resign and we could have to go all through the last 12 months again - in the meantime getting nowhere. It is incredibly frustrating. We spent hours studying the November Budget, the March Budget and what it means to our clients, and then with a sweep of the hand, 50% of it gets dropped to make way for dissolution of Parliament.
Instead of Philip Hammond's one Budget per year, we are now going to have had 3, and if a coalition or new PM is the outcome, it could all change yet again. In the meantime, what is there to do other than carry on regardless. We are as busy as we can ever remember, thank goodness, but trying to give tax advice at the moment is near impossible. Watch this space, as they say.
Posted: 12th May 2017
All the MTD proposal were dropped before Parliament dissolved so that the Finance Bill could receive Royal Assent. Will MTD return - yes indeed. HMRC had introduced the proposals on a two tier system so that there would be primary legislation covering the overall proposals and secondary legislation which can be amended as we go along. We'll have to wait and see what happens but it is more likely to be a question of " when " rather than " if ".
Taxpayers can activate their personal digital tax accounts now but agents will not be able to access them until commercial software has been developed later this year. In the meantime, it looks as though paye code numbers could be amended every month, not only a nightmare for payrolls but also a problem for underpaid tax collections. Here in 2017-18, HMRC now have the means to collect underpayments for 2 years instead of one, 2015-16 as well as 2016-17. Be afraid !
We are not rushing into MTD ourselves. Our challenge is not going to be the software but how we manage clients expectations of coping with 4 quarterly returns a year followed by an adjusting return and a declaration, 6 in all for each tax year. It is not going to be an easy matter, especially in the run up to MTD and the transitional year.
Keep watching this space. As soon as the legislation is published, we'll post more news here. In the meantime, look out for our next e-newsletter - Across the Desk - due out next week.
Posted: 24th April 2017
Another day, another U-turn. After the Budget fiasco of the attempted national insurance increase, who could be surprised at Mrs May wanting to dump the old manifesto ? Tax increases are on the way and we must expect another Budget soon after the election, whatever the outcome.
Here at GRCA we are finding this all very disappointing. How on earth can you plan anything !! Our view is that the election is not necessary and it is causing further uncertainty just when businesses needed greater confidence to invest. It will not all be over on the 8th June. Problems don't just ' go away '.
Have another look at your plans for 2017-18 and don't forget to ask yourself the ' what if ' questions.
Posted: 31st March 2017
Here we are again, end of the tax year around the corner. If you haven't used your annual allowances by now, be prepared to lose them and start thinking about 2017-18, whatever it might hold for us all. Come to think about it, it's a very odd date to have a year end - most countries do it by calendar year.
You have to wonder what was going through the Chancellor's mind when he reversed the decision to increase the Class 4 self employed National Insurance Contributions. What a fiasco. It was right to criticise him for breaking the triple lock in the manifesto because we have been relying on that for tax planning and advice. Mind you, there are plenty of stealth taxes coming through, from road tax to probate fees. It's going to squeeze us here in the south-west, especially with businesses already having to cope with the additional costs of autoenrolement, business rates and minimum living wages.
2017-18 could be tricky year, despite the confident start. You can almost see it coming with maybe a bank base rate thrown into the mix. If you are in business, plan in some extra costs and ask that ' what if ' question to test your breakeven position - what if sales decrease by 10%, what if I have to decrease my margin by 10% to compete, at the same time as costs increase by 5%. One of the bigger risks is the dreaded bad debt, so watch your credit control and double check your Ts and Cs.
Posted: 9th March 2017
You can find enough comments, as well as the Budget papers themselves, all on-line, enough to sink a ship by the looks of it. The hot topic is the extra NI for the self employed but that was signalled 6 months ago, so not really a surprise as such.
Our issue is with Making Tax Digital. So they have moved the the over £10,000 landlords and incomes up to the VAT threshold back a year to April 2019 but that just means it coincides with all VAT registered self employed. April 2019 is looking more like a cliff at the moment. The other confusion is the ' over VAT threshold but not VAT registered ' self employed from April 2018. Who could that be ? Dentists, Doctors, IFA's and anyone outside the VAT net, maybe landlords with large property portfolios - ouch - these are big businesses and they will not be ready.
Some of the HMRC explanations just do not make any sense at all and you have to wonder who writes this rubbish.
In the meantime, we are concentrating on the here and now. 31st March is a year end for many buisinesses and the tax planning needs to be in place and dividends voted - but watch out for the new higher dividend tax when total personal income goes over £43,000. Use it or lose applies to most personal annual allowances, so a this is the time for a quick review rather than worry too much about the last Spring Budget.
Posted: 24th February 2017
Whilst we are kicking our tax news around waiting for the 8th March, we can remind you that the Capital Gains Tax rates are the lowest they have been for years, except that is for residential property, where the 8% extra still applies. So you might now be looking at your share portfolio, especially with the FTSE at 7300 and thinking about cashing in some of the gains. Remember that the first £11,100 CG each is tax free - will it last ? Certainly the rates will go up sooner rather than later.
We are pretty sure that inflation will hit in later in the year and interest rates have to rise. Business rates, the minimum living wage and auto-enrolement for workplace pensions, are all going to push up costs for small businesses and service industries, so they will have to pass some of it on.
We should know more about Making Tax Digital on 20th March when the Finance Bill is published. In the meantime we have taken the precaution of writing to most clients and landlords who we feel might be affected next year by the current proposals but we can only hope that common sense prevails and everything is delayed at least until 2019.
Posted: 8th February 2017
Wouldn't you just know it ? HMRC published their programme for Making Tax Digital ( MTD ) on 31st January ! Well, well, what should we read into that timing ? A great deal.
Their programme has not changed at all. Small businesses under the VAT threshold from April 2018, unicorporated businesses over the VAT threshold from April 2019, and all incorporated business from April 2020. Should we be afraid ? Yes we should.
Whilst there has been lots of analysis, the Federation for Small Business has offered the first sensible comment i.e. " postpone for 2 years because there is no trial period and there is no explanantion of what records are supposed to be submitted quarterly ".
We are analysing the HMRC statement to understand what it means for GRCA clients. We all have to get our ducks in a row because this is going to happen as politics seems set to over-rule common sense once again. Another fine mess awaits but we are determined to be prepared and now getting geared up to help all our clients get through this transitional period.
Posted: 30th January 2017
Our latest e-newsletter, Across the Desk, January 2017, is now available.
It's been a funny old month what with our PM rushing off to the US and Turkey. She seemed a bit lost in the world of Trump, if there is such a world, that is. He must be impossible to deal with, and our Theresa didn't seem to know what to make of him, or did she. After all she is the experienced politician, he is a businessman. We live in interesting times, but should remember the media try to make the news these days, rather than report it. Better we concentrate on what we can control, and businesses must start their planning for 2017-18.
There are two keys to a business plan. Firstly, write down the assumptions on which the plan is based, and secondly build in the ' what if ' questions, such as ' what if sales fall by 10% ? '. It would make sense to add a risk analysis and don't foget the uninsurable risks such as competition and loss of reputation. Preparing a business plan is a good exercise in itself but you need to put time aside to get the most benefit.
It would be interesting to know what the Chancellor is thinking right now. Oil prices, gold, the cost of Brexit, the problems with the NHS funding, and maybe he has to raise taxes, based on the answers to his own ' what if ' questions.
Posted: 16th January 2017
We did say that things would go quiet but not this quiet. HMRC already posponed their response to the second Making Tax Digital consultations and we are still waiting for their proposals. The thinking is that the start limit will go from £10,000 income to the VAT registration level, which would make a great deal of sense. It might be a good sign they are taking a longer look at this - maybe the new Chancellor has something to do with it. We'll be covering all MTD in detail here on this page.
It's that time of year when you need to be looking to use all your tax allowances before 5th April. So many of them are annual allowances and it really is a case of use it or lose it. We keep saying it, every individual has different circumstances, so please come and see us, whatever the question. We had a surprise telephone call the other day - a client who retired in 2000 has inherited some money and needed advice - lovely to see him again and chuffed he made the call.
Watch out for the Budget on 8th March. Is it early for a reason?
Posted: 19th December 2016
As expected, everything goes quiet now, certainly for tax news and related financial matters. There is an interesting case going to the Court of Appeal which we have mentioned before. It's about the lack of provision in a Will, where the daughter challenged her Mother's legacies to animal charities. The daughter won the first round, but the charities are fighting back. It is a landmark case and will be of interest to many. As we write this, the FTSE is around 7,000 and the pound about 1.19 to the Euro, with various European countries having elections looming and a stern test of the EU as it currently stands. As for the UK, inflation seems inevitable, but whether these Christmas strikes by Southern Rail, the Post Office, and British Airways Unions will amount to a challenge, remains to be seen.
The Government needs to bring both sides of the Brexit debate together. It is not constructive to have such divisive opinions 6 months on going into 2017 and whilst Theresa May seems to be the ultimate in cool PM, the underlying debate is anything but. To some extent, there is little else in the news other than the terrible events in Aleppo, but maybe some more ' stronger together ' messages from 10 and 11 Downing Street would be welcome.
Watch out for the next release of " HMRC : Making Tax Digital " paper in early January. The second phase consultations are over but whether the new Chancellor has any say, remains to be seen. The current tax system is far too complicated to make it user-friendly digital, so we can expect the MTD project to actually change the tax laws to fit, rather than the other way around.
Merry Christmans to one and all!
Posted: 12th December 2016
Expect prices rises. It's nothing to do with Brexit - we have had so many currency fluctuations in the past, that it's a hedge fund game nowadays. Some businesses are increasing prices anyway and blaming it on Brexit (will they reverse them if we don't Brexit?), but many of them export as well, so enjoying a double whammy benefit. Also do not believe the polls or surveys. They have been so wrong since before the 2015 general election. We means any polls or surveys - there is a clear indication now that respondants are not actually voting with their heads up. Enough.
Prices rises are being forced on business by auto-enrolment (remember the increase to 8% is scheduled for 2018), the new minimum living wage and by the new business rate (applying from April 2017). We are going to be facing cost push inflation next year so it almost seems inevitable. Do we blame George Osborne - possibly. Business cannot afford to keep absorbing costs, some are finding refuge on the internet and foresaking the High Street, but most will have to put up prices whether we Brexit or not.
Along with that comes higher interest rates which are good for investors but bad for borrowers and an increase for pensioners (unless the rules change again). You can't please all the people all the time !
Posted: 6th December 2016
Personal financial news will go quiet now. We've had the Autumn Statement and we know pretty much what's in store in the run up to 5th April. That's much the same for businesses. A few headlines appeared regarding the new business rates appeal system and new avenues of peer-to-peer lending ( such as the Funding Circle ) could help businesses expand if they can afford the interest, that is. We are also heading for Christmas, so tax news seems to shut down. The financial news is more likely to be dominated by the euro and the fallout from the Italian referendum.
Here at GRCA, we are in overload now, with December and January filing deadlines fast approaching. We are wondering if the next announcement on Making Tax Digital will mean anything. The second round of HMRC consulations has finish but the result has been postponed for 4 or 5 weeks and now due early January. Digital will overtake us all by 2020, so we had better get used to the idea.
Posted: 25th November 2016
How boring was that ? Accountants can do boring. We like stable and calm and reassured. That works, but when the headlines are about ' no more Spring Budgets ' you sort of get the prioities.There has been so much on-line that we are not making any pointers here other than saying GET YOUR TAX RETURNS IN please. We are in overload already and still 2 months to go. So, no change is good. At least we can plan through till the 5th April and beyond. We are still getting questions about saving tax when, to be honest, we are well through this tax year and if you haven't got the ideas in place now, you are running out of time.
Watch out for more big brother in the form of HMRC's new data collection powers and their £80m Connect computer. This little fella will scan and compare and profile your everything, business and personal, and if things don't add up, Connect will add them up for you. This system will scan everyhting in the public domain and much more besides. We are talking here about, personal and business tax returns, vat returns, banks, estate agents, Land Registry, land and property transactions, auctioneers, stockbrokers, financial intitutions, everything filed with Companies House, limited companies, people, history, Charities ( how many should be VAT registered ? ), social media and so on.
One investigation was launched after someone posted on Faceboook that they had enjoyed a full on holiday with friends in the British Virgin Islands at Daddy's expense. Daddy was no doubt delighted when HMRC knocked on the door to ask what was actually going on in the BVI. Be warned - seriously. HMRC is cracking down and the Politicians are looking for results here.
Posted: 16th November 2016
It maybe that Brexit and Trump are creating uncertainties but small business is very reslient and has adapted and survived change over the years. Instead of worrying about what we cannot control, we need to be looking for the opportunities and hopefully the new Chancellor will deliver next week. We shall certainly be looking for an increase in the 100% allowance for new equipment but beyond that, he will probably be looking at the bigger picture on infrastructure projects. The problem with the latter is that they take so long to deliver, although perhaps we have seen a message of intent with the announcements on Hinkley Point and Heathrow.
Your business year end might be some way off but don't forget the opportunities offered for tax relief through the R & D tax credits scheme. You will need an R & D firm to assist with the project and the data capture, but this has worked well for a number of our clients. Pre year end investment in plant is also an option although we expect the 100% relief for electric cars to be removed now. We are happy to help with pre year end planning.
The Rush Begins
Posted: 3rd November 2016
Only 50% of tax returns done and 3 months to the deadline. It's gonna be another mad panic despite the benefits of getting tax returns done in May or June, including earlier tax repayments, preparation to meet known liabilities and most importantly, starting the 12 month HMRC enquiry clock ticking. At the same time, we are in the midst of tax planning for 2016-17, already looking at corporate 2017 year ends and trying to second guess what might be in the Chancellor's Statement on 23rd November. Its a very busy time for us right now.
On We Go
Posted: 7th October 2016
That's it. Our latest PM has spoken. Sort of. There have been so many reviews and comments this week, we are not going to make more of it again here. What do we make of the economy and tax outlook as a result of the changes at the top ? HMRC has reorganised yet again with new people heading up their 4 internal departments but we are still getting the same old political threats and messages. Sometimes you have to wonder who dreams up this nonsense. More importantly now, the new Chancellor will slacken the purse strings on 23rd November. Austerity must take a back seat whilst we invest in housing and infrastructure. The Government seeks a place at the top table but even in comparison with poor Spain, we are lagging well behind now.
The trains, stations and travel facilities are a disgrace, especially here in the west country. You have to wonder if we'll ever catch up - once the leading industrial nation on the planet, the decline through lack of reinvestment in trains has been as spectacular as the roads programme. New thinking is badly required if we are to keep pace even with our supposedly poorer European neighbours.
Back to tax, let's remember that the rates of capital gains tax are the lowest in memory, and with the FTSE over 7,000 today, it might been time to cash in some of those stocks and shares for a rainy day.
Investing in the Future
Posted: 23rd September 2016
We are delighted to announce that Paige Montagnon is joining us. Paige is a student at Plymouth University taking an Accounting and Finance Degree, and she will become a trainee with us working part-time whilst she finishes her Degree. Whilst she is learning the ropes here, Paige will also take a special interest in Cloud bookkeeping and accounts and Digital Data capture, through which GRCA will become a leading light in the preparation for HMRC's Making Tax Digital. As we have said many times, MTD will create a major change in the way we run our businesses, so we had better be ready or pay the price ( fines ? ).
In the meantime, HMRC has started to send out text messages to taxpayers warning that they are being "monitored" to ensure they pay on time. More than 13,000 self-assessment taxpayers have taken part in trials which have seen them sent SMS messages. The taxpayers, who had previously been contacted by HMRC about their debt, received three types of message from the Government's "Nudge" unit or Behavioural Insights Team. The ‘standard' SMS message alerted the recipient to the debt and told them how to pay, while the 'monitoring' message pointed out that HMRC would be monitoring whether the debt was paid in the following week. The ‘penalties' message included the phrase, 'Most people pay on time to avoid penalties'. HMRC reported that sending out the 'monitoring' message raised payment rates by 3.8 percentage points, and the 'penalties' message by 7 percentage points, or 20% in relative terms.
>The Revenue says it has gained an extra £210m from taxpayers by using ‘nudge’ tactics that predict how people will respond to official communications and encourage them to make the ‘right’ response. However, Anita Monteith, senior tax policy adviser at the ICAEW, warned that ordinary taxpayers could become needlessly alarmed by the messages
Posted: 9th September 2016
HMRC’s digital tax plans have been delayed until 2019 so that large businesses have enough time to adjust, it was announced at the taxman’s annual conference.
Financial secretary to the Treasury Jane Ellison, MP, said; “You also told us that even slightly larger businesses might need more time to prepare for the new system – so we have proposed deferring the introduction of any changes to 2019 for those businesses too.”
The move comes in response to concerns over the ‘worryingly short’ timetable for implementing HMRC’s ambitious digital tax strategy.
HMRC is making exceptions for smaller businesses that may not be able to adapt to digital tax.
Jane Ellison, MP, continued “You told us that the smallest businesses might struggle to keep their records online – so we exempted over a million more landlords and small businesses from the proposed changes.”
Posted: 5th September 2016
Our posts here have been slow of late, not because we have all been on holiday, but because the news of change and all things tax seem to have taken a break. We had a very busy August for some reason, and this month has a similar feel about it. Our Making Tax Digital concerns have not receded, despite the HMRC announcement that 1.3m businesses and individuals with gross income of less than £10,000 will be exempted. At least that's better than nothing. Further HMRC consultations are taking place this month but our nearest one is in Bristol, which is too time consuming a trip when there is so much other work to be done.
We have had a few questions about Estate planning recently. One client wanted to give her two small rental properties to her children until we advised she couldn't keep the rentals ( it would be a conditional gift rather than an outright gift ) AND a gift of a non-business asset triggers a capital gains tax disposal with no ability to roll over or postpone the gain and no cash with which to actually pay any CGT. She could have sold the properties and used the cash to pay the CGT, and then given away the money to her children. Provided she lived for 7 years, the gifts would drop out of her Estate, but then of course she has no income to supplement her pensions.
We are looking forward to hearing what the new Chancellor has to say in the Autumn Budget. There have been few indications of how the economy is going to be mapped out until 2020. The interest rate has dropped 0.25% but that's about it. At least there was no knee jerk reaction to the Referendum, thank goodness. So we are just in a holding pattern at the moment. That doesn't stop you having to think about the business and the rest of your 2016-17 tax year. Allocated part of your hectic week for administration and sales.
We have joined the expanded Devon Chamber of Commerce. It's good to meet people outside of your immediate geographical location and there is always something to learn. We do like the idea of their " D Club " as a forum for our new digital world and business apps and look forward to active participation.
Of politics and picnics
Posted: 9th August 2016
With the stock market around 6700 or better, is this the time to cash in some of the gains ? Capital Gains Tax rates are at an all time low, so perhaps if you have inherited assets or anything similar, this might be an opportunity not to be missed. Pre 1988, the CGT rates were also lower than normal income tax rates but it didn't last long. We have to consider our tax planning with one eye on the political arena. The replacement of George Osborne with Philip Hammond is a significant move and the new PM has already announced she is going to abandon the deficit reduction targets. This is meaningful.
The new Chancellor has not produced an emergency Budget or anything similar. Indeed, he is not planning any policy announcements until his Autumn Statement, so this buys him time. As we understand it, he is taking a completely fresh look at the Treasury, and therefore HMRC, and depending on the economic mood, we could see a reversal of some of George's more ambitious plans going to 2020. For sure there will be changes, so all the more reason to take advantage whilst we can.
Tax free at the moment are rent a room income, £7,500 for 2016-17, Capital Gains Tax nil rate band £11,100, personal allowance £11,000, gross interest £1,000 ( £500 for higher rate taxpayers ), dividends £5,000, total £35,600 if you can so organise your finances.
Our summer e-newsletter - Across the Desk is now available
Posted: 18th July 2016
It was impossible to cover all the Brexit topics in the newsletter. The fall in the £ will benefit exporters and Devon and Cornwall tourism, but it will equally penalise importers and travellers abroad. Those clients who are not UK nationals or who employ non UK domiciles, do not know where they stand, and not knowing is part of the problem. But we should not talk about winners or losers anywhere in this debate because small businesses and their owners here in the South West have always learned to improvise and adapt, whatever is thrown at us.
Our own concerns are the doubts spread by the media. For example, we follow the 'This is Money' website, but today there was a headline article about with-profits funds being hit. For goodness sake - talk about old stories being recycled - with-profits funds have been bad news for years - this is nothing new at all, and certainly not news. There was a story on the radio at the end of last week about how much extra it would cost to have a typical meal out in Spain but no mention of how much cheaper the same thing would be for Euro tourists here.
Experts are predicting this and that, usually the other. The E & Y Items Club has predicted a slump - why should we take any notice - they are famous for getting it wrong. Experts are predicting a fall in house prices - presumably these are the same experts who predicted a 40% rise in house prices in 2007, immediately before the recession ! Bookmakers are offering odds on the new Government - these are the same Bookmakers who offered a 76% vote for Remain.
So here at GRCA, we are saying that yes we understand that the internet and social media has brought expectations of immediacy but that is no way to react to our own business or personal circumstances. Rethink the next 3 years, rethink and ask those " what if " questions and just remember Poirot - small steps. We are keen to help and advise in any way we can and any concerns shared are concerns halved, so just telephone for a chat or drop us an e-mail rather than worry too much about the Referendum result itself.
Brexit - keep calm and carry on
Posted: 15th July 2016
The Bank of England ignored the headlines ( funnily enough ) and made the sensible decision to keep interest rates at 0.5% and the new Chancellor, Philip Hammond has said he will not be making any policy announcements until the usual Autumn Statement at the end of November. It has always been the GRCA policy to ignore the headlines - do you remember those over Easter 2007 which said " property prices will increase by 10% per annum over the next 4 years " - 3 months before the recession started. It is the same now - journalists so love to write negative punch lines - regardless of the fact that effects on any financials are long term. That is of course unless you work in the City where our savings are used by the hedge funds to bet on short term outcomes.
So we like to take the medium term view. The new Prime Minister has suggested a ' steady as she goes ' approach and with 75% of the new Cabinet from the Remain camp, Leavers are going to come out of this a little disappointed as we move from one grey mist to another over the next 5 years. What we do need are more tax incentives to invest and easier access to funds to allow business to expand. Certainly in the South West, we have not fully recovered from the Recession, so we need to get back to reality now and start pushing for our fair share of infrastructure investment.
Brexit - Don't Panic
Posted: 21st June 2016
A nice quote from Lord Leach of Fairford ( who died last week ) " Brexit will not be an economic disaster nor will it be a utopia " - so in these last few days, what are we to do?
It was really disappointing to hear George Osborne say he would undo his own ' tax lock ' in the event of a Leave. It seems that we can't trust any of them now and very disappointing for us tax professionals who have been advising clients with some certainty that the tax lock policy provided. If the polls are right, it will be a close call, but Parliament has the final say-so and with 75% of the MPs wanting to Remain, we might be able to second guess where this is going. We'll have to wait and see now. There will not be another general election until 2020.
Please remember that the rates of Capital Gains tax are at an all time low. It cannot stay this way for more than a couple of years, so if, for example, you have any inherited assets or property with planning permission, it would make sense to think about a sale. Be careful about giving assets away to family members - it still counts as a disposal for CGT purposes.
HMRC has tried to simplify the CGT calculations but the rules are very complicated, so you must take professional advice first.
EU fails to reach deal to tackle company tax avoidance
Posted: 1st June 2016
European Union finance ministers have failed to reach agreement on new rules to counter tax avoidance by clamping down on schemes by multinational companies to disproportionately reduce tax bills. Countries such as Luxembourg, Ireland and Belgium were among the most critical of plans to deter companies from shifting profits to low-tax countries and aimed at forcing them to pay taxes on dividends and other profits made in tax-free countries. In the wake of the Luxleaks and Panama Papers revelations, ministers were under pressure to approve new rules proposed in January; however, any deal has now been deferred until June.
Posted: 10th May 2016
With Brexit dominating the news, it's easy to forget that we are in a new era of tax and tax planning, and you should be preparing for the rest of 2016-17. It really is just a case of spending a little time whilst taking a view of yourself and your business. Profit extraction from small limited companies might need to be changed, and the thinking needs to be done now, not at the 11th hour on 4th April 2017. Part of the rationale here is that you will not attract funding for expansion or even sell your business if it is not profitable, and now is exactly the right time to overhaul the budgets and the latest estimated outcomes ( LEO ). You should do that hand in hand with your personal goals for savings and/or family expenditure ( schools especially ), and not wait. A plan beats a no plan, any time. It's not difficult but it is a matter of practice year after year and honing those skills. Spend a little time with your accountant right now - it might be a better investment than you could ever have magined.
It's All Over Now?
Posted: 4th May 2016
It doesn't take too long for the media to move from one headline to the next but no doubt the Panama Papers will re-emerge at some point along the line. In the meantime, HRMC claim its 2014 crackdown unit has collected nearly £500m and pressure continues on the legal offshore tax havens to disclose beneficial ownership. In fact, in Spain, it is the banks' duty to uncover beneficial owners of accounts and report them to the tax authorities. But here we are at the start of the silly season and restaurant tips are the headlines today. No mentioned anywhere is the fact that tips are part of earnings and are taxable, but who should be responsible - the employee or the employer - and how long will it be before HMRC get into the debate.
Please get your 2016 tax returns completed as soon as possible. Only then will you get back your tax repayment or know what liabilities to save for. HMRC has a 12 months window to enquire into your tax return, so the sooner you get it submitted, the sooner the window shuts.
The only news we have on Digital Tax Accounts is that they have started appearing as unpopulated area on some individual's on-line tax accounts. You cannot set up a DTA, HMRC will be doing that, but we are no further forward in knowing how much financial data they are looking for every quarter nor if the 30th September will become the new 31st January, as has been mooted in some quarters. The consultations continue with less than 23 months to go!
Back Yard Scrap
Posted: 15th April 2016
A couple of weeks into which the Panama Papers have been released and the Prime Minister has published his tax return ( soon to replaced by a digital tax account ), you would think it comes as an irresistible urge for all us dodgy accountants to take up arms. Not a bit of it. We know full well how the system works, we know that over 6,000 of the top richest people in the UK already have their own HMRC monitor and we know they have the powers of arrest and prosecution. We also know that the Treasury has always over-estimated the tax they guess has been avoided. Unfortunately for the uninformed commentators, they seems to be missing the relevant point, and at times, plain wrong. However, the point about evasion and avoidance is nothing new and we must therefore conclude that the media doesn't have too much else to report on and the silly season has started early ahead of the EU referendum. The point is made today when international tax evasion has been removed from the headlines in favour of the high sugar and salt content of Dolmio Sauces, which for us at least, says it all.
Happy New Tax Year
Posted: 4th April 2016
Chartered Accountants are not usually known for their effervescent personalities, but the 5th April brings out the best and worst. It is the end of one tax year ( use it or lose it ) and the start of the next (get planning to use the new tax regime), so deep joy all round and Happy New Tax Year to you all.
Posted: 22nd March 2016
The Budget announced a new method of ISA savings, the lifetime ISA, or LISA as it has already become known. We make two comments about LISA. Firstly, how on earth are individuals supposed to know what is better for them, LISA, ISA, Pension, SIPP, Auto-enrolment, and so on. With the new personal tax savings account, perhaps there is no need to tax shelter all savings ? Secondly, will LISA be the thin end of tax relief for pension contributions. A clever idea by the Chancellor - Let's not stop tax relief on pensions ( yet ), let's introduce a competitor product first!
Posted: 17th March
There's always two sides to the Budget. The side which makes the headlines is not very interesting to the majority of our clients. The flip side is VERY interesting, and the Budget yesterday was no exception - there were many changes. The fact that our corporation tax is going to become 17% is great news, although compared with the USA 40% and our European neighbours mostly around 30%, is going to make the UK a tax haven, which seems a little at odds with the proposal to crack down on tax havens, but we know what you mean George - just don't spend too much effort on it. Let the HMRC's excellent and professional transfer pricing unit do their stuff.
The decrease in capital gains tax rates was a surprise, but read in with that the Autumn proposal to bring forward a CGT liability payment on account within 30 days. How will that work - we are not told but it seems that residential property, especially second homes, property developments and the like are the targets, with the 3% extra Stamp Duty and restrictions on finance costs going through. It does seem odd that corporate landlords are exempt, and there was nothing in the Budget to stop that loophole.
The headline CGT rates of 10% and 20% will mean it becomes more attractive to make capital gains rather than generate income. Such a policy existed before 1988 when the then Chancellor change the law so that Capital Gains would be added to other income, so we don't expect these new lower rates to last very long if the net result is a decrease in the personal tax take.
The increase in relief for small business rates was really good news. It will affect many of our clients and reduce their costs, at the same time as they have to cope with the new minimum living wage and auto-enrolment. There were the usual increases in personal allowances and ISA's but no attack on pensions which was a relief to many savers.
There was no proposal to pull back on the introduction of Digital Tax Accounts for all by 2020, and we are still no further forward in understanding how these will work. As expected, there will be a 2018 option to pay tax quarterly along with the DTA submissions and clearly this is the thin end of that wedge. The tax levied on the balance of overdrawn Director's Loan Accounts has increased from 25% to 32.5% but this remains a ' loan ' to HMRC until the DLA is repaid. However it will obviously impact on the initial cash out-flow.
We are still going through the small print but if there is anything which catches your eye or you need to see if a change affects you, please ring or email. In the meantime, watch this space!
Posted: 4th March 2016
In the next 5 weeks we have the Budget on 16th, most business year ends on 31st, the tax year end on 5th April and the start of the 2016-17 tax year on 6th. Something in the mix will affect you and yours, whether it is Stamp Duty on second homes and buy to lets, capital gains tax ( possibly bringing forward the tax due dates ), maybe stopping the first 25% pension draw down from being tax free and new restrictions on tax relief on contributions, and so on to the next tax year and changes in dividend and interest tax and maybe that first 6m of digital tax accounts we were promised last July.
Just take time out to ponder on these things. You have to make the best of what you have, so ISA allowances maybe, Gift Aid contributions to reduce high rate tax ( that might change on 16th ), pensions action before the Budget, pre year end planning for your business and lining up yourself and your finances for a good start to 2016-17.
Naughty Step for HMRC
Posted: 19th February 2016
Of all the sneaky tricks to come up with, ( and without warning ) HMRC have taken dividends received from the 2014-15 tax returns and coding them out of the paye codes for 2016-17 to accelerate tax receipts. There will be much angst in the next few months as advisors and tax payers try to get their tax codes put right, or there are going to be a lot of paye refunds at the end of the next tax year if there are no, or lower, dividends. Typically this move is a road to nowhere other than more disentanglement headaches for tax advisors and taxpayers alike!
Making tax digital, or: You're having a laugh
Posted: 12th February 2016
The 'consultation' meetings have started, heaven help us all. They seem to be a mix of advising the advisors and testing the waters on quarterly tax payments. Yikes.
Anyways up, like it or not, all businesses will be required to report at least quarterly to HMRC - it is not up for negotiation. So when will it start? For tax years after 5th April 2018, all businesses under the VAT registration threshold and individuals with secondary income of more than £10,000, followed by VAT registered businesses followed by Companies from 1st April 2020. For most advisors, this seems to be the wrong way around.
There seems to be no decision yet on how much information is to be submitted, so software providers are unable to start working on it. Some think every invoice and every payment/receipt with no analysis, others maybe a quarterly summary. Another fine mess is on it's way via a computer screen near you.
The Minister says that telephone filing will be also available - did you ever try to ring HMRC?
Posted: 28th January 2016
It's no good waiting until the last minute to find out that higher rate tax relief on pension contributions has disappeared or that capital gains tax has changed or Class 4 NIC has increased by 5%. Who knows what will be in the Budget but with it's overall majority, this Government is determined to force the pace on whatever it thinks is necessary, with only a nod to any consultation process. We only have 6 weeks to pause and take stock of our finances. Will any changes be immediate, will it be better to postpone until after 5th April and into the next tax year. " What if " applies like never before, so don't be the one who hasn't thought about it.
ARE YOU READY?
Posted: 19th January 2016
Get your investments fit to deliver better tax free income in 2016-17. No, we are not talking about ISA's but using the new Personal Savings Allowance ( PSA ). From 6th April 2016, the first £1,000 of gross interest income will be tax free to standard rate taxpayers. With some current accounts now paying 5%pa interest, it makes more sense than an easy access cash ISA most of which are only paying 2% or less.
IT BEGGERS BELIEF
Posted: 12th January 2016
The Head of HMRC resigned last week following pressure from MPs over the continuing poor standards of service. She didn't get any severance pay but still left with a damehood in the December 2015 Honours List and a £2.1m pension pot.
HAPPY NEW YEAR (Not)
Posted: 5th January 2016
From the founder of Down 2 Business (Plymouth):
"Recently added my signature to an online protest regards the Governments plans to request four quarterly Tax Returns from business. A response has been released by the Government as follows: The Government has responded to the petition you signed – “Scrap plans forcing self employed & small business to do 4 tax returns yearly”.
Making Tax Digital will not mean ‘four tax returns a year’. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.
These reforms will not mean that businesses have to provide the equivalent of four tax returns every year. Updating HMRC through software or apps will deliver a light-touch process, much less burdensome and time-consuming than it is today.
At the March 2015 Budget the government committed to transform the tax system by introducing simple, secure and personalised digital tax accounts, removing the need for annual tax returns.
At the 2015 Spending Review the government announced it would invest £1.3bn in HMRC to make this vision a reality, transforming HMRC into one of the most digitally advanced tax administrations in the world.
One element of this vision will be asking most businesses, self-employed people and landlords to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.
Many taxpayers have told HMRC that they want more certainty over their tax bill, and don’t want to wait until the end of the year, or even longer, before knowing where they stand with their taxes.
We also estimate that £6.5bn in tax goes unpaid every year because of mistakes made when filling in tax returns. These reforms will make it easier for taxpayers to maintain accurate and up-to-date tax affairs, reducing the scope for error.
With businesses keeping track of their tax affairs digitally, quarterly updates will be fundamentally different from filling out an annual tax return in a number of crucial respects:
• Quarterly updates will not involve all the complexity of a full tax return. The updates will be generated from existing digital business records. In most cases, little or no further entry of information will be needed. It will be much quicker to complete than the current tax return.
• As part of the process the business owner or individual will receive a developing in-year picture of their tax position, helping people have greater certainty about what they owe, allowing them to plan their finances more effectively. This differs from the current system where many taxpayers are caught out by their tax bill when it finally arrives.
• In-year updates will not be subject to the same sanctions for lateness or inaccuracies as apply now to the year-end position. HMRC will consult during 2016 on what sanctions might be appropriate for a more digital tax administration.
The government has already announced that these measures will not apply to individuals in employment or pensioners, unless they have secondary incomes of more than £10,000 per year from self-employment or property.
The reforms will rely on businesses, self-employed people and landlords using software or apps that can connect securely to their digital tax account. The government will ensure that free products are available. The Gov.UK service will signpost taxpayers to the right product, with clear HMRC guidance about how to choose software.
HMRC will ensure support is available for people to get online if they need it. We will also provide alternatives for those who genuinely cannot use digital tools, like telephone filing. This will build on our Needs Extra Support service, which has gone from strength to strength in helping more vulnerable customers.
We’re introducing these reforms gradually. We’ve been in discussion with stakeholders since March 2015 and will be consulting on the details of the proposals throughout 2016.
We will use volunteers to test the new tools and processes and give us feedback. Quarterly updates will be introduced for some from 2018, and will be phased in fully by 2020, giving taxpayers time to adapt.
We want to work with all stakeholders to ensure these changes work for them. For more information about the proposed reforms please search for ‘Making Tax Digital’ on Gov.UK or use the following link: gov.uk/government/publications/making-tax-digital
Full response here: petition.parliament.uk/petitions/115895?reveal_response=yes
Across the Desk
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